Annuities: What Percentage Should Be in Your Retirement Portfolio?

Annuity Guys® — Mon, 14 Aug 2023 06:00:09 +0000

The answer is… 50 percent (NOT!!!) — want to know why many insurance sales agents might say that?

It’s nice when empirical research validates something that we have observed and practiced for years with our financial planning clients.

Wade Pfau, a professor at American College who specializes in retirement income determined that based upon current market conditions a hypothetical couple ages 65 would have their best success for generating a four percent annual income by using a combination of…[continue reading below video]

Video: Dick and Eric discuss, how to determine the correct percentage of annuities to have in your retirement portfolio.

**Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.

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[continued]…50% equities and 50% fixed annuities.

We typically do not espouse an exact percentage, but rather design our income plans to cover the foundational expenses with sources like social security, pensions and annuities. If you take care of the foundation the flexibility with your additional assets can be significantly enhanced.

Check out more on the Death of the 4% financial planning withdrawal Rule.

Say Goodbye To the 4% Rule

The Wall Street Journal

Can your nest egg last your whole lifetime? It’s getting tougher to tell.

Conventional wisdom says you can take 4% from your savings the first year of retirement, and then that amount plus more to account for inflation each year, without running out of money for at least three decades.

This so-called 4% rule was devised in the 1990s by California financial planner William Bengen and later refined by other retirement-planning academics. Mr. Bengen analyzed historical returns of stocks and bonds and found that portfolios with 60% of their holdings in large-company stocks and 40% in intermediate-term U.S. bonds could sustain withdrawal rates starting at 4.15%, and adjusted each year for inflation, for every 30-year span going back to 1926-55.

Well, it was beautiful while it lasted. In recent years, the 4% rule has been thrown into doubt, thanks to an unexpected hazard: the risk of a prolonged market rout the first two, or even three, years of your retirement. In other words, timing is everything. If your nest egg loses 25% of its value just as you start using it, the 4% may no longer hold, and the danger of running out of money increases.

If you had retired Jan. 1, 2000, with an initial 4% withdrawal rate and a portfolio of 55% stocks and 45% bonds rebalanced each month, with the first year’s withdrawal amount increased by 3% a year for inflation, your portfolio would have fallen by a third through 2010, according to investment firm T. Rowe Price Group. And you would be left with only a 29% chance of making it through three decades, the firm estimates.

That sort of scenario has left many baby boomers who are in the midst of retiring riddled with angst. “The mind-blowing aspect of retiring is all these years you’re accumulating and accumulating, and then you need to start drawing down, and you have no idea how to do that,” says Al Starzyk, a 66-year-old retired printing executive in Williamsburg, Va.

So, if you can’t safely withdraw at least 4% a year from a balanced portfolio of equity and bond funds, what do you do? Here are three alternative approaches that retirement specialists say may work better to ensure your money lasts as long as you do:

Use annuities instead of bonds

Pairing the most plain-vanilla type of annuity—called a single-premium immediate annuity—with stocks, retirees can generate income more safely and reliably than if they use bonds for that piece of their portfolio, says Wade Pfau, a professor who researches retirement income at the American College of Financial Services in Bryn Mawr, Pa.

To arrive at that conclusion, he plotted how 1,001 different product allocations might work for a 65-year-old married couple hoping to generate 4% annual income from their portfolio. [Read More…]

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Using OutCome Based Planning for Your Retirement

We practice and recommend a "Holistic - OutCome Based Planning process when considering annuities." This approach has the effect of balancing your overall portfolio so you can meet your retirement objectives by "first identifying the least amount of your investments or savings (if any) that should be considered for annuities." OutCome Based Planning analyzes and models multiple outcomes so you can clearly identify your best income and growth opportunities.

"The Annuity Guys will only call if you request help". Hence, when you are ready for specialized help we will be available.

"Working with an Experienced Fiduciary Financial Planner can help you Avoid a Trial & Error or Risk Based Retirement"

This type of approach does take considerably more time, effort and analysis which will show you mathematically the successful possibilities by comparing various outcomes rather than trying to sell or convince you of that "so-called one best solution." Clients frequently tell us that this process removes some of the confusion and emotion to help them objectively identify a better retirement plan; rather than just ending up with the most convincing salesperson or advisor.

When requesting help you can be assured of working with an experienced Annuity Guys' Retirement Planner who is independently insurance licensed and securities licensed as a fiduciary financial planner having access to the vast majority of annuity companies in helping you choose the best annuities using a holistic-outcome based planning approach. We consider the high quality advisor recommendations we make to our website visitors as a direct reflection back on our commitment to serve all client's with a high standard of excellence in financial planning for retirement.

Based on survey feedback on advisors from our website visitors, we eliminated about two-hundred local advisors and now only recommend a few that we consider experienced vetted Annuity Guys' Fiduciary Advisors. Many local advisors continue requesting us to recommend them as a vetted advisor. However, our reputation and future business is driven only by satisfied website visitors. So, unfortunately we've had to tell the vast majority of local advisors no, since we changed our business model four years ago. At that time we stopped trying to satisfy everyone with local advisors, we now primarily work with individuals who are comfortable using today's internet technology to their fullest advantage by working with a select group of vetted, experienced and knowledgeable Annuity Guys' Fiduciary Planners.

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*Fiduciary Financial Planners we estimate at less than 10% of total US financial advisors.
The other 90% of advisors are salespeople such as brokers, bank reps, registered reps. & insurance agents.

Advisors licensed only as a sales oriented securities broker, registered rep, or insurance agent, ARE NOT Fiduciaries! They work on a much lower legal standard of Suitability which does not require full disclosure and only requires a suitable product sale, NOT what's actually best for their client!

Fiduciary Financial Planners by law are subject to the highest standard of financial planning and investment advice accountability.
Hence, clients of a fiduciary can know that their advisor is required legally to work strictly for their highest benefit.

This is also referred to as the prudent man rule, which in simple terms means that by licensing as a Series 65 Investment Advisor / Financial Planner they must give clients the best advice they are capable of based on all the knowledge they possess and information they have access to, in the same way they would advise and help close friends or family members.

Fiduciaries also must disclose all known conflicts of interest that could potentially bias their advice, such as - selling financial products that pay them higher commissions with higher fees or costs, and their lack of investment product availability for their clients' needs, just to name a few.

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Selecting the Best Annuity & Retirement Income Advisor

Are you willing to work with one of our retirement and annuity advisors based on their experience and expertise as a first priority rather than being limited by a local or regional area? The good news is that technology has forever eliminated our geographical limitations and leveled the playing field for everyone! As a result of today's technological advances, all of us can now work confidently with experts in any field including personal finance. We are no longer confined by regional or local boundaries limiting our choices and ultimate success. A high quality advisor is now as close as a click or phone call away.

Video:"Choose a National or Local Advisor"?

"There is no room for trial and error when it comes to choosing MarketFree® Annuities or a Successful Retirement Planner."

When you think about it, your money is almost always in some other state with a custodian; whether invested in the market or with an annuity insurance company, the advisors competence is primarily needed when positioning your money initially. So working with a specialized expert in a financial discipline like investments or retirement planning is imperative. There are no undo buttons in retirement! Once the annuities get set up correctly, it is customary and more efficient for owners to benefit by having direct access to the issuer instead of having to go through the agent. And, of course any reputable advisor, local or national, is more than willing to assist their clients if needed after they are implemented.

Video:"Why These 3 Types of Annuity Advisors are Not Created Equal"

"There are no undo buttons in retirement so it is vitally important that you do it right the first time!"

We are fortunate to have a select few who we believe are truly the highest qualified advisors out of about two hundred licensed insurance agents that we eliminated. Your survey feedback is what helps us make these tough decisions. Our advisors have an independent financial practice, specializing in annuities and retirement planning, which helps ensure that you are given the best options available for your retirement planning.

Video: "How Much of Your Money Should You Consider Placing into Annuities"?

"It takes an experienced expert to know how to structure annuities for income, inflation, growth, return of principal, and tax advantage."

"Anyone can sell you an annuity; however, it takes a truly qualified and experienced advisor to know how to structure them for income, inflation, growth, return of principal, and tax advantage. Typically, there is not just one that can accomplish all of these objectives. It is how an advisor structures multiple annuities in balancing your total portfolio that makes it possible to achieve your most important retirement objectives."

Video: "How to Choose a Great retirement Advisor"?

Why Searching for the Best Annuities on Your Own Can be so Frustrating...

Almost everyone nowadays turns to the internet for answers on everything - from buying new widgets to researching just about everything under the sun; and finding the best annuity is no exception! At first, it may seem that researching will be straightforward but the more time you spend researching them, the more frustrating it can be. Why is this? First of all, it does not take long to realize that gimmicks abound - such as warnings and alerts from salesmen who just want your attention so they can sell you one or the "too good to be true" claims of 8% to 14% **guaranteed interest and of course the claim that you can get the full market upside with no downside risk! If you have done any research you have heard all of these claims in advertising which are mostly half truths and not fully explained. So how can you find the best annuities on the internet? The truth is... you can't! And what is even more frustrating is all the conflicting points of view from so called experts. There are well over 6,000 different annuities - all designed for different reasons, so is it any wonder that the deck is stacked against the average researcher or do-it-yourselfer. Add to that the fact that they pay high enough commissions to attract a plethora of both good and bad agents. This does not make annuities good or bad; they are simply a financial tool that truly benefit those who use them correctly. How can you find the best annuities for your unique situation?

Use the internet cautiously;
Work with a vetted and experienced specialist;
Do not settle for that one dubious best plan. Compare multiple Outcome Based Plans to decide on the one that is truly best for you;
Be keenly aware of scare tactics and hyperbole - avoid those advisors and websites;
Avoid websites that are focused on rushing free reports, rates and quotes to get your contact information they are rushing you to speak with them, instead, take your time and choose someone you are more comfortable with that works on your time-table;
Know the Five Vital Factors (listed above) that an experienced specialist must answer before helping you select the best options for your situation;
Watch this telling video "Avoid Annuity Gimmicks, Amateurs and Charlatans"...

Video: "Avoiding Gimmicks, Scams & Charlatans"

^** Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. Annuities are not FDIC insured and it is possible to lose money.
They are insurance products that require a premium to be paid for purchase.
Annuities do not accept or receive deposits and are not to be confused with bank issued financial instruments.
During all video segments, Dick and Eric are referring to Fixed Annuities unless otherwise specified.

^*Retirement Planning and annuity purchase assistance may be provided by Eric Judy or by referral to a recommended, experienced, Fiduciary Investment Advisor in helping our website visitors. Dick Van Dyke semi-retired from his Investment Advisory Practice in 2012 and now focuses on this website. He still maintains his insurance license in good standing and assists his current clients.
Our vetted and recommended Fiduciary Financial Planners are required to be properly licensed in assisting clients with their annuity and retirement planning needs. (Due diligence as a client is still always necessary when working with any advisor to check their current standing.)

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MarketFree Annuity Definition: Any fixed annuity or portfolio of fixed annuities that protects principal / premium and growth by remaining market risk free.
Market Free (annuities, retirements and portfolios) refer to the use of fixed insurance products with minimum guarantees that have no market risk to principal and are not investments in securities.
Market Gains are a calculation used to determine interest earned as a result of an increasing market related index limited by various factors in the contract. These can vary with each annuity and issuing insurance company.
Premium is the correct term for money placed into annuities principal is used as a universal term that describes the cash value of any asset.
Interest Earned is the correct term to describe Market Free Annuity Growth; Market Gains, Returns, Growth and other generally used terms only refer to actual Interest Earned
Market Free Annuities are fixed insurance products and only require an insurance license in order to sell these products; they are not securities investments and do not require a securities license.
No Loss only pertains to market downturns and not if losses are incurred due to early withdrawal penalties or other fees for additional insurance benefits.
Annuities typically have surrender periods where early or excessive withdrawals may result in a surrender cost.
Market Free Annuities may or may not have a bonus. Some bonus products have fees or lower interest crediting and when surrendered early the bonus or part of the bonus may be forfeited as part of the surrender process which is determined by each contract.
MarketFree Annuities are not FDIC Insured and are not guaranteed by any Government Agency.
Annuities are not Federal Deposit Insurance Corporation (FDIC) insured and their guarantees are based on the claims paying ability of the issuing insurance company.
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